Transaction reality · Before you buy
The purchase price is not the total cash you may need
Published · Reviewed by The Diligence Standard Team · Updated
Buyers naturally focus on the headline price. The business may require additional cash to keep operating at the level represented.
How it appears in a real transaction
A deal can be priced on earnings while excluding normal receivables, inventory or cash needed between paying employees and collecting customers. Deferred maintenance can add another immediate bill.
A practical example
A buyer pays $1.2 million, then needs $180,000 for working capital and $95,000 for equipment that should have been replaced before closing.
What to do next
- Build a monthly working-capital history.
- Confirm exactly which cash, receivables, payables and inventory transfer.
- Inspect assets and deferred maintenance.
- Maintain a post-close liquidity reserve.